By Russell McAthy.
Smart marketers are now looking to the middle of the funnel to get the most from their campaigns. This is where you can get significant incremental revenue if you’re willing to invest in data!
There are few markets where a person converts instantly, with no prior knowledge or opinion on the product/service. As a result, the marketing funnel (the process by which someone moves from having a need through to final conversion) has become core to the way we approach consumer engagement. Regardless of the market you operate within or the marketing philosophy you subscribe to, the funnel itself has three general themes:
Top – Awareness
Middle – Consideration
Bottom – Conversion
Smart marketers create campaigns which cater for each of these areas in order to educate, convince and persuade. This approach means that some marketers will allocate effort and resources to each stage of a funnel in a way that is not the most efficient. Below you see that we spend the most time focused on the bottom of the funnel because it has the quickest return on investment;
The majority of brands are already optimising the bottom of funnel as this is where, using last click, you get an instant impact on conversions. It is the easiest stage to sell-in your marketing efforts to C-level to gain investment, with almost immediate results to determine if a strategy is successful or not, it appears much lower risk.
One metric we assess the quality of marketing activities on is the Cost per Acquisition (CPA) blended across all types of visitors. This is the most common way of understanding the value of our work and allows us to test new tactics. However, the higher up the funnel your consumers are, the higher the typical CPA will be as your conversion rate in a single session will be significantly lower. This can dissuade brands from investing in the middle of the funnel; thus missing out on the area of greatest opportunity.
Not only does focusing purely on the bottom of the funnel miss opportunities, it can also put off consumers who are positioned higher up the funnel and do not respond well to that type of messaging. Avinash Kushaik (link) (the original analytics guru) is renowned for his framework “See, Think, Do” which is based on the same principles. He highlights in his writing on content marketing frameworks how crazy it is to focus on just the bottom of the funnel.
“The Do (Bottom, Convert) audience intent cluster is…. the one on which 97.296% of the current marketing activity is focused: an audience with strong commercial intent, close to making a purchase. … …BUY NOW, BUY NOW PLEASE! – are simply trying to maximise the chance they’ll bump into Do intent. In the processing, annoying everyone in the See (Top, Awareness) and Think (Middle, Consideration) intent clusters!)”
However, we are causing this problem ourselves with the way we attribute our marketing activities. When considering a blended CPA it makes it impossible to drive significant incremental growth. The bottom of funnel activities will always be able to be optimised further to get those marginal gains. There are opportunities to gain small growth quickly when lower down the funnel, however the opportunity to generate longer term significant growth is only available when you are able to invest in people (pay a higher CPA) who will convert in the future.
Looking at an example consumer (the channels are quite interchangeable) we can start to see where the opportunities are.
A prime example comes when Brand PPC is the last converting channel. Most companies will have 100% impression share, low CPC’s, low CPAs, high CTRs and well-optimised ad-copy for their brand PPC terms. They have however maxed out the volume that is available – and you can’t possibly buy more impressions through PPC bidding without significant investment in increasing brand awareness. What you can do however, is increase the volume of people who are aware of your brand activities higher up the funnel by capturing consumers before brand preference and search becomes paramount. You need to be present before your potential customers are ready to convert in order to naturally increase the impressions you receive on brand terms further down the line.
Investing in people who will not convert is hard to sell to stakeholders/budget holders. The status quo right now dictates that we spend money today and we make money today. Those in marketing roles need to be able to justify their strategies to stakeholders, and risk that if they lose the faith of those senior stakeholders whilst waiting for a return on their investment, then they may also risk losing their budgets or worse case, their roles. This approach works for individuals, but to drive long-term results best for the business then the true value of your marketing activities needs to be considered. A very high percentage of your cost today is not driving the returns you make today – there is a lag between cost and converting revenue. By understanding this, and that higher up the funnel your returns simply take longer to be seen, you can take a more intelligent approach to your strategy.
If people aren’t going to convert instantly this is where we look to the middle of funnel. These are people who are researching, comparing you against your competitors or consumers who are just not ready to convert yet. A lot of channels specialise in this type of consumer although are incentivised and have KPIs that focus on converting. Channels such as PPC do very well in a last click scenario however a lot of the keywords, ad groups and campaigns should actually be targeting and be incentivised for success around the middle of funnel. SEO and content marketing should live in the top and middle of funnel. This is where it is around education of the consumer through the art of great content.
Whilst every market’s funnel will be slightly different, the elements on which brands compete with one another will frequently be around three core themes – Price, Quality & Trust. Targeting users higher up the funnel may have a high blended CPA in the short-term, but over time as it increases the number of people reaching the bottom of your sales funnel, it can also contribute to increasing your conversion rate there too.
When you consider the impact on increasing conversion rate lower down the funnel, and the volume of consumers who will reach the conversion point; it is clear that the mid-funnel is exactly where the opportunity for brands now sits.
Using attribution modeling you can apportion a true % of the revenue to each activity in the funnel. This allows you to calculate the ROI of activity that has yet to convert, and therefore optimise to a true tactical led approach.
The largest opportunity every brand has right now is looking at the middle of funnel – the 1-2 weeks prior to conversion in most cases. Putting a testing budget here to buy users in advance of their converting activity captures a much larger pool, which can then be targeted using retargeting to convert in a short time frame in a cost efficient manner.
The main insight that is needed to do this is having an understanding what activity is truly driving future converting activity and this is where attribution really adds significant value.
I regularly speak on how attribution supports the middle of funnel and how this can drive significant impact on both volume and ROI. Here is a link to a deck I did at the Search Elite conference on 9th May 2017, where this was one of the topics of conversation.
It would be great to see you at a conference we are attending in the future, click this link for details, dates and discounts.